The liability to pay customs duty arises upon redemption of confiscated goods under Section 125, and the assessment of such duty is governed by Section 28, with interest on delayed payment under Section 28AB applicable.

JUDGMENT :

PAMIDIGHANTAM SRI NARASIMHA, J.

1. Introduction: “The following two questions arose for our consideration; i) Whether there is a liability to pay customs duty when the confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 1962¹[Hereinafter referred to as ‘the Act’.]? ii) Whether, the liability to pay such duty will include the liability to pay interest on delayed payment under Section 28AB of the Act? Adjudication of these questions brought to light certain seemingly contradictory decisions on this question, and this requires us to reflect on the correct ratio of the decision of this Court in Commr. of Customs (Import) v. Jagdish Cancer and Research Centre, (2001) 6 SCC 483, hereinafter referred to as Jagdish Cancer case. Therefore, the third question that fell for our consideration is; iii) What is the true and correct ratio of the decision in Jagdish Cancer case?”

1.1. For the reasons to follow, we have held that the owner of goods has a liability to pay customs duty, even after confiscated goods are redeemed after payment of fine under Section 125 of the Act. Furthermore, when confiscation proceedings are initiated under Section 124 of the Act, the obligation to pay duty and other charges under Section 125 will arise only when the owner of goods exercises the option to pay fine for redemption of goods and the Department accepts it. Liability to pay customs duty in such confiscation proceedings under Section 125(2) is distinct from the assessment and determination of duty, which can rise only under Section 28. The duty liability arising under Section 125(2) must be assessed under Section 28. Thus, we answered the second question by holding that once Section 28 applies for determination of duty, interest on delayed payment of duty under Section 28AB follows. We have also clarified that Jagdish Cancer case is not an authority for the proposition that when the liability to pay customs duty arises under Section 125(2), the calculation, determination or the assessment of such duty cannot be made under Section 28.

1.2. The facts relevant for consideration of the issues are as follows.

2. Facts: Between 30.11.2003 to 18.04.2007, the appellant availed the benefit of exemption from payment of customs duty under a notification dated 01.03.2002, as per which certain self-propelled hydraulic piling rigs were to be utilised exclusively for the construction of roads, bridges etc. for NHAI³[National Highways Authority of India.] and PWD⁴[Public Works Department.]. When investigations revealed that the appellant has violated the import conditions, even before a show-cause notice was issued, the appellant deposited Rs.16,29,22,282/- and interest of Rs. 1,84,39,696/- between May, 2007 to August, 2007. Thereafter, a show-cause notice⁵[The show cause notice is purportedly issued under Section 124 read with Section 28 of the Act.] was issued on 23.01.2008 proposing confiscation under Section 111(o) with respect to goods that were valued at Rs. 48.55 crores involving duty liability of Rs. 17,37,57,039/- under Section 28, interest under Section 28AB and penalties under Sections 112(a) and (b) and 114A of the Act. The appellant filed an application under Section 127B of the Act before the Settlement Commission claiming that it has not violated any condition of the n